It may be that VC funding did not accelerate because new funding avenues have opened up for entrepreneurs in this space. The initial coin offering (ICO) boom of 2017 saw unprecedented levels of funds raised in a non-traditional form. CoinDesk’s ICO tracker logged over $3.5 billion in funds raised via ICOs!

On top of the ICO explosion we also saw another type of boom: in a new type of bitcoin fork that has come to be known as an “altcoin airdrop.”

While most of the crypto assets in existence have been created via software forks of Bitcoin Core, they have historically started with a new genesis block and thus a new distribution scheme for the tokens themselves.

You can see a fairly complete list of the airdrops at btcdiv.com, but many of them don’t even show up on market cap lists because they have little value.

From looking at the top few forks you could claim that about $50 billion in value was created/raised via bitcoin forks in 2017.

As an engineer who had to deal with the fallout from the fork frenzy, it became tiring pretty quickly as it was clear that the vast majority of these forks would not have sufficient value to warrant spending scarce developer resources trying to support them.

Bitcoin usage

While you may think of bitcoin as being a cryptocurrency, some users think of it as a trust anchor. By embedding data into bitcoin’s blockchain, other systems can gain new properties such as tamper evidence and immutability.

The amount of outputs that embedded data into the blockchain more than doubled year over year, due to the increased popularity of platforms such as Blockstack, Colu, and Omni.

A more controversial aspect of the changing nature of bitcoin is the transaction fees.

While rising fees have caused significant frustration for users trying to transact in smaller amounts of value, an optimistic view is that the network security is on the right path toward sustainability.

If fees don’t eventually replace the block subsidy, then either the thermodynamic/computational security of the network will have to drop or perpetual inflation will have to be introduced in order to pay miners to maintain the same level of hashing power.

Bitcoin transaction fees relative to the block subsidy increased from 5.7% to 31.7% this year. If fee rates remain the same in terms of satoshis per virtual byte, Bitcoin's computational security will be self-sustaining in 6.5 years after 2 more halvings. https://t.co/OA3oIhHeIjpic.twitter.com/xUCMs5BB6q

Technical improvements to block propagation continued to decrease the latency at which new blocks are seen by most peers across the network. This means that nodes come to consensus about the state of the blockchain faster, which reduces the occurrence of orphaned blocks.

Interestingly, the output value of the average transaction (without trying to guess and subtract change outputs) appeared to rise along with the exchange rate. Almost as if BTC is being used as the primary unit…

Bitcoin in 2018

Looking forward to 2018, Lightning Network development has been progressing nicely. I wrote about the promise of Lightning Network two years ago and it’s finally coming to fruition, though there are still plenty of challenges to overcome.

The next phase of development in the ecosystem will be speeding up economic interactions.

Payments via second-layer networks will be one leap forward, but the “atomic age” will usher in even greater innovations such as trustless, decentralized, real-time peer-to-peer exchanges.

If you are developing sidechains, forkchains or altchains, you should be prepping for atomic swaps. The atomic age is coming, what cannot be swapped will be left behind. All that protects your trades today are “if” statements. In atomic swaps you get real cryptographic guarantees

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